Cisneros Sues to Block News- DirecTV Deals

10/19/2004 10:29 AM Eastern

By: Multi Channel News Staff

The Latin American reorganization announced last week by News Corp. and DirecTV Group Inc. will face a potential legal obstacle.

Cisneros Group affiliate Darlene Investments LLC filed suit against News Corp. and DirecTV Monday in Miami-Dade Circuit Court in Florida in an attempt to block the Latin American moves, Reuters reported.

The suit alleged that transactions involving Sky Brasil and Sky Mexico were the result of a gross undervaluation of DirecTV's Latin American assets and fraudulent statements from News Corp., according to Reuters.

The suit also alleged that the arrangement breached noncompete agreements and that News Corp. never intended to help DirecTV's Latin American operations, instead planning to "dismantle" DirecTV, Reuters reported.

News Corp. spokesman Andrew Butcher told Reuters the company has been "very upfront with what our plans were and we've implemented those plans," adding, "We're confident that the agreements we made regarding Latin America will stand up to scrutiny.”

The series of transactions under scrutiny -- with Grupo Televisa SA, Globopar and Liberty Media Corp. -- was announced Oct. 11.

According to the Oct. 11 statement, Sky Brasil and DirecTV Brasil will merge, and DirecTV Brasil customers will migrate to Sky Brasil. DirecTV Group will acquire the interests of News Corp. and Liberty in Sky Brasil.

DirecTV affiliate Galaxy Mexico will close its operations and sell its subscriber list to Sky Mexico. DirecTV customers in Mexico will be offered the opportunity to migrate to Sky Mexico. DirecTV Group will acquire the interest of News Corp. and, jointly with Televisa, the interest of Liberty in Sky Mexico.

And DirecTV Group will acquire the interests of Globo, Televisa, News Corp. and Liberty in Sky Multi-Country Partners, which has DTH platforms in Colombia and Chile. Sky customers in Colombia and Chile will migrate to DirecTV.

DirecTV Group is paying $579 million in cash for the equity stakes in the Sky platforms.